from 4 to 6 vehicles

[Pacun]

I have been using mileage on 4 vans for a construction contractor. In September he bought a 5th car and immediate was put in service. Same thing for the 6th car purchased in November. 

I now have to use actual cost. What do I do with the other cars in order to move them from mileage to actual expenses? 

Since my client is forced to move to actual expenses, I think any reasonable solution might work.

Will it be different if I move to actual expenses a client with only 2 cars?

[TexTaxToo]

See Pub. 463.  You can switch back and forth between the standard mileage rate and actual expenses any year, as long as you used standard mileage the first year the vehicle was in service.

If you are asking about depreciation, part of the standard mileage rate is depreciation which must be used to reduce basis. Again, see the table in Pub. 463. Once you have used the standard mileage rate the first year, only straight line depreciation is available in the years you use actual expenses:

Quote

If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you can’t depreciate your car under the MACRS rules. You must use straight line depreciation over the estimated remaining useful life of the car.

To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. The rate per mile varies depending on the year(s) you used the standard mileage rate.

 

[DANRVAN]

14 hours ago, Pacun said:

What do I do with the other cars in order to move them from mileage to actual expenses?

Your software should take care of that Pacon.

With ATX you use the fixed asset module to input the actual cost data.  Then it allows you to toggle back and forth between actual cost and SM on a year to year basis.

14 hours ago, Pacun said:

bought a 5th car and immediate was put in service. Same thing for the 6th car purchased in November. 

Does he use all 6 at the same time?  The rule states you cannot use five or more simultaneously.  

So for example if he had five vehicles, four used all the time but kept one as a spare he would be allowed to continue using actually expense method.

14 hours ago, Pacun said:

Will it be different if I move to actual expenses a client with only 2 cars?

Not sure what you mean here.

[Pacun]

On 6/18/2022 at 10:42 AM, DANRVAN said:

Does he use all 6 at the same time?  The rule states you cannot use five or more simultaneously.  

So for example if he had five vehicles, four used all the time but kept one as a spare he would be allowed to continue using actually expense method.

I think it is the other way around. He can use the actual expenses method if he had 1 or 7 cars. He cannot use the mileage method if he has 6 cars being used simultaneously. 

[DANRVAN]

You are correct, I said that backwards; left brain vs right brain.

If he had 5 vehicles but one was strictly used as a spare when one of the other four was not in use he could continue to use SM.